Friday, July 22, 2016

The point of commonality across all the speakers at yesterday's Hudson Institute event on Plutocrats, me included, was that the United States (and indeed almost all countries in the Global North, though we were all focused on the United States) desperately needs a new social-political compact that provides avenues for broadening the class base of wealth creation in the old industrial core. If we don't develop such a compact, ugly, ugly things are going to happen politically.

My own argument, which I confess I hadn't much planned in advance, but which seemed like the right one when my speaking slot came up after Tyler Cowen and Jeffery Winter was:

1. Trumpism and Brexit are both symptoms of the fact that large numbers of people in the old industrial heartlands feel as if they have been left behind and out of the cultural and economic gains of the last generation. These political phenomena are among other things a backlash against the effects of the twin insurgency which Trump (and Brexit) supporters believe has ruined one community after another. In particular, it is lower-education, low-mobility groups in the population who have been most adversely affected:

2. In this, they are entirely accurate: we are at the end of the Kondratiev Wave which began in the 1970s on the basis of information technology and neoliberal policy reforms. This most recent K-wave generated significant productivity growth in the 1980s and 1990s based on improved capital flows and supply chain optimization (e.g., during the E and P phases of the K-wave). Since 2000, however, as the K-wave reached it mature (R phase) phase productivity gains have slowed way down, and innovation in the infotech space has given way to unproductive nonsense like Facebook and Pokemon Go: a good sign that there's not a lot of additional productivity to be wrested out of the current configuration of technology. Furthermore, while the income benefits associated with the productivity gains were somewhat broadly spread in the 1990s, since 2000 virtually all the gains have gone to the upper income echelons. The downturn of 2008 represented the death knell of that structure of accumulation (that is, the K-wave entered its D phase), and the closing of the technology frontier is having all sorts of malign political effects....

3. Until/unless we both get a new K-wave going on the basis of new platform technologies (who knows what that will be: biotech? robotics? AI? clean energy?) and rework our political order so that the economic benefits of the productivity gains from these new technologies are broadly distributed, we're going to be screwed. The major challenge on the latter score is that our political institutions are completely dysfunctional, including above all in their ability to reform themselves in the context of political polarization. Then again, maybe Trump is successfully killing off conservatism in this country, allowing for significant political reform. In which case we may be on the verge of a new technological and political dawn.